Recovery likely to start next year after bumpy road ahead

Hungary’s economy is likely to shrink by 5 percent this year and may only reach its 2019 level in 2022, according to a report by the Századvég Institute released on Monday.

The coronavirus situation still presents a significant risk to the forecast, however, the think tank said.

The volume of household consumption spending is set to stagnate this year before growing by about 4 percent in 2021, it said.

Economic uncertainty will continue to weigh heavily on businesses, the state and municipalities, all of which are unlikely to invest due to a scarcity of financial resources. Government loan schemes providing cheap money for businesses will only partially offset this tendency, it added.

Investments are likely to drop by 4.9 percent this year and by 3.1 percent in 2021.

Similarly, the recovery on the labour market is likely to be stuttering, Századvég said. As the economy opened up again, some of the newly jobless found work, but some sectors started to revive more gradually, it said, adding that the jobless rate was likely to average 4.2 percent this year and 3.7 percent in 2021.